-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UGnIkeamk8qNZMak09+40cYhNXf0aevr9/7eDMEM2bpxejAadkN22XnT9V4Pbr4l 1wL26gM+UtzzopCUoA4HuA== 0000861502-01-500009.txt : 20010504 0000861502-01-500009.hdr.sgml : 20010504 ACCESSION NUMBER: 0000861502-01-500009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010325 FILED AS OF DATE: 20010503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COEUR D ALENES CO /IA/ CENTRAL INDEX KEY: 0000861502 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED STRUCTURAL METAL PRODUCTS [3440] IRS NUMBER: 820109390 STATE OF INCORPORATION: ID FISCAL YEAR END: 0925 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-10676 FILM NUMBER: 1621296 BUSINESS ADDRESS: STREET 1: PO BOX 2610 CITY: SPOKANE STATE: WA ZIP: 99220-2610 BUSINESS PHONE: 5099246363 MAIL ADDRESS: STREET 2: PO BOX 2610 CITY: SPOKANE STATE: WA ZIP: 992202610 FORMER COMPANY: FORMER CONFORMED NAME: CONJECTURE INC /IA/ DATE OF NAME CHANGE: 19931209 FORMER COMPANY: FORMER CONFORMED NAME: COEUR D ALENES CO /WA/ DATE OF NAME CHANGE: 19931209 10QSB 1 tenqsb301.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 25, 2001. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ TO ________________. Commission File Number 0-18353 THE COEUR D'ALENES COMPANY (Exact name of registrant as specified in its charter) Idaho 82-0109390 (State or other jurisdiction of (IRS Employer incorporation or Identification No.) organization) PO Box 2610, Spokane, Washington 99220-2610 (Address of principal executive offices) (Zip code) (509) 924-6363 (Registrant's telephone number, including area code) Applicable only to issuers involved in bankruptcy proceedings during the preceding five years. Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes___No___ Applicable only to corporate issuers. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 5,341,580 shares of common stock, no par value, were outstanding as of April 25, 2001. Transitional Small Business Disclosure Format (Check One) Yes[ ] No[X] PART I. FINANCIAL INFORMATION. Item 1. Financial Statements. The accompanying condensed consolidated financial statements of The Coeur d'Alenes Company (sometimes referred to herein as the "Company") should be read in conjunction with the audited consolidated financial statements and related notes included in the Corporation's Annual Report on Form 10-KSB for the year ended September 30, 2000. The comparative consolidated balance sheet and related disclosures at September 30, 2000 have been derived from the audited balance sheet and financial statement footnotes. The accompanying condensed consolidated financial statements reflect all adjustments that in the opinion of management are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the six month period ended March 25, 2001 are not necessarily indicative of the operating results to be expected for the full year. The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet dates and reported amounts of revenue and cost during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates based on information that is currently available. Changes in facts and circumstances may result in revisions of those estimates. Condensed Consolidated Financial Statements Consolidated Balance Sheets at March 25, 2001 (unaudited) and September 30, 2000 (audited) Unaudited Consolidated Income Statements for the Six Months Ended March 25, 2001 and March 25, 2000 Unaudited Consolidated Income Statements for the Three Months Ended March 25, 2001 and March 25, 2000 Unaudited Consolidated Statements of Cash Flows for the Six Months Ended March 25, 2001 and March 25, 2000 Condensed Notes to Unaudited Consolidated Financial Statements THE COEUR D'ALENES COMPANY CONSOLIDATED BALANCE SHEETS March 25, 2001 and September 25, 2000 March 25, September 30 2001 2000 (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 81,015 $ 115,532 Accounts and notes receivable 1,027,997 1,226,837 Inventories 2,467,392 2,680,550 Other current assets 107,879 65,000 Total current assets 3,684,283 4,087,919 Property and equipment 5,703,175 5,630,525 Less accumulated depreciation 2,052,518 1,908,938 Net property and equipment 3,650,657 3,721,587 Other assets 41,904 82,223 Total assets $7,376,844 $7,891,729 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short term bank borrowings $ 273,364 $ 618,890 Accounts payable 940,034 865,536 Accrued expenses 220,193 328,119 Current maturities on long-term debt 234,697 210,733 Total current liabilities 1,668,288 2,023,278 Long-term debt: Deferred tax liability 184,000 184,000 Long-term debt less current maturities 2,365,411 2,437,293 Total long-term liabilities 2,549,411 2,621,293 Total liabilities 4,217,699 4,644,571 Stockholders' equity: Capital stock 1,186,192 1,186,192 Retained earnings 1,984,083 2,071,776 3,170,275 3,257,968 Less treasury stock at cost 11,130 10,810 Total stockholders' equity 3,159,145 3,247,158 Total liabilities and stockholders' equity $7,376,844 $7,891,729 THE COEUR DALENES COMPANY UNAUDITED CONSOLIDATED INCOME STATEMENTS Six months Ended March 25, 2001 and March 25, 2000 2001 2000 Net sales $6,322,548 $5,891,024 Cost of sales 4,707,224 4,330,908 Gross profit on sales 1,615,324 1,560,116 Selling, general and administrative expenses 1,632,771 1,503,967 Operating income (loss) (17,447) 56,149 Other income (expense) Interest income 16,214 15,873 Interest expense ( 138,301) ( 117,128) Other income 338 1,387 Total other expense, net ( 121,749) ( 99,868) Loss before income tax benefit ( 139,196) ( 43,719) Income tax benefit ( 51,503) ( 16,176) Net loss ( 87,693) $( 27,543) Loss per share (basic and diluted) $( 0.02) $( 0.01) Weighted average shares outstanding 5,342,067 5,344,628 THE COEUR D'ALENES COMPANY UNAUDITED CONSOLIDATED INCOME STATEMENTS Three Months Ended March 25, 2001 and March 25, 2000 2001 2000 Net sales $3,113,793 $2,991,911 Cost of sales 2,264,134 2,185,788 Gross profit on sales 849,659 806,123 Selling, general and administrative expenses 838,199 728,176 Operating income 11,460 77,947 Other income (expense) Interest income 6,563 7,513 Interest expense ( 71,503) ( 52,078) Other income 131 763 Total other expense, net ( 64,809) ( 43,802) Income (loss) before income tax expense (benefit) (53,349) 34,145 Income tax expense (benefit) (19,739) 12,634 Net income (loss) $ ( 33,610) $ 21,511 Earnings (loss) per share (basic and diluted) $ ( 0.01) $ 0.00 Weighted average shares outstanding 5,341,969 5,344,628 THE COEUR D'ALENES COMPANY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended March 25, 2001and March 25, 2000 2001 2000 Cash flows from operating activities: Net loss $( 87,693) $( 27,543) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 143,580 116,370 Provision for doubtful accounts 12,000 3,000 Changes in assets and liabilities: Accounts and notes receivable 186,840 129,266 Inventories 213,158 154,422 Prepaid expense and other current assets ( 42,879) ( 40,681) Other assets 40,319 20,721 Accounts payable 74,498 259,376 Accrued expenses ( 107,926) 738 Net cash provided by operating activities 431,897 615,669 Cash flows from investing activities: Additions to property and equipment( 72,650) ( 154,406) Cash used in investing activities ( 72,650) ( 154,406) Cash flows from financing activities: Net repayment under line of credit ( 345,526) ( 275,911) Borrowings of long-term debt 36,043 - Principal repayment of debentures - ( 128,000) Principal repayment of long-term debt ( 83,961) ( 81,726) Treasury shares repurchased ( 320) ( 620) Net cash used in financing activities ( 393,764) ( 486,257) Net decrease in cash and cash equivalents ( 34,517) ( 24,994) Cash and cash equivalents, beginning of period 115,532 32,422 Cash and cash equivalents, end of period $ 81,015 $ 7,428 THE COEUR D'ALENES COMPANY CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies. Significant accounting policies followed for the six months ended March 25, 2001 are the same as those contained in the Summary of Significant Accounting Policies from the Company's audited financial statements as of September 30, 2000 as included in 10KSB filed on December 22, 2000. (2) Inventories. Inventories are summarized as follows: March 25, September 30, 2001 2000 (Unaudited) (Audited) Fabrication inventories: Raw materials $ 11,702 $ 26,574 Work-in-progress 484,827 579,622 Inventories, at FIFO cost 496,529 606,196 LIFO reserve ( 29,155) ( 29,155) Inventories, at LIFO cost 467,374 577,041 Distribution inventories, at FIFO 2,000,018 2,103,509 Total inventories 2,467,392 2,680,550 (3) Short-term bank borrowings. The Company has $1,500,000 in bank credit lines which mature on February 16, 2002. Interest is charged at the lenders' prime rate ( 8% as of March 25, 2001). Outstanding borrowings totaling $273,364 are collateralized by accounts receivable and inventories. The credit line agreement contains covenants under which the Company may not pay dividends in excess of 10% of annual net (after tax) profit, or enter into mergers, acquisitions or any major sales of assets or corporate reorganizations without prior consent of the bank. The Company is also required to maintain certain financial ratios concerning working capital and debt to equity, as well as a minimum net worth of $2,200,000. The Company was in compliance with each of these covenants as of their most recent respective measurement date. (4) Capital Stock. The Company conducted a tender offer to shareholders with holdings of one hundred or fewer shares beginning in January 1999 and which has been extended through May 31, 2001. The offer resulted in 584 shares being repurchased as treasury stock during the current fiscal year. The purpose of the tender offers was to buy out odd lot holders of stock with diminimus value which cost the Company more to service than the value of the stock held by the shareholder. (5) Federal Income Tax Expense As of March 25, 2001and September 30, 2000, the Company has a deferred long term tax liability of $184,000 (unaudited) and $184,000 (audited) respectively resulting primarily from the use of accelerated methods of depreciation of fixed assets and a deferred tax asset of $65,000 (unaudited) and $65,000 (audited) respectively resulting from vacation accrual and bad debt allowance. A valuation allowance on the Company's deferred tax assets has been established to the extent the Company believes it is more likely than not that the deferred tax assets will not be realized. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT. This report contains forward-looking statements regarding, among other items, anticipated trends in the Company's business. These forward-looking statements are based largely on the Company's expectations and are subject to a number of risks, uncertainties, certain of which are beyond the Company's control. Actual results could differ materially from these forward-looking statements as a result of the factors described elsewhere herein. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this report will in fact transpire or prove to be accurate. LIQUIDITY AND CAPITAL RESOURCES The Company anticipates that it will continue operating the steel distribution business much as it has for the past year during the twelve month period beginning March 26, 2001. In October 1999, the Company signed a two year lease on a small warehouse facility in Wenatchee, WA. The Company conducts a business similar to the retail steel distribution business in Spokane on a much smaller scale. The operation has been open since November 1999. Required inventories are expected to be in the $50,000 to $75,000 range during the next twelve months. The Company has the option to extend the lease for an additional five year period with a 3% per year escalation in the required lease payment. The replacement cost of metal inventories is still historically low. The ongoing energy problems are having an adverse effect on demand within our market area. Most of the higher priced metal in our inventory has been sold and, with a few exceptions, our current values very closely parallel replacement costs. The fabrication business likely will have smaller inventory requirements in the near future, as business has slowed down in response to the aluminum industry shutdown. The Company currently has no plans for any major capital asset additions or replacements for the remainder of the current fiscal year. The Company maintains an investment in Road Renovator, LLC, a limited liability corporation formed as a joint venture to manufacture and market a pot hole patching machine. The prototype has been successfully completed. If satisfactory manufacturing and sales agreements can be negotiated, The Coeur d'Alenes Company has an option to make an investment of up to $150,000. This investment will be made to fund a portion of the cost of the prototype and provide working capital to operate the LLC until such time as the sales and marketing efforts are successful. To protect its investment, The Coeur d'Alenes Company may also have a contingent requirement to provide an additional $165,000 over the next two years to allow the joint venture to make payments on a finance lease taken out to fund the remainder of the cost of the prototype. The sales and marketing plan anticipates sales of 4 units during the remainder of the year 2001. If these sales materialize, it will not be necessary for The Coeur d'Alenes Company to invest any more capital in the LLC during the current year. During the first six months of the current fiscal year, cash flows of $432,000 were provided by operations, compared to cash flows of $616,000 provided by operations during the same six month period of the prior fiscal year. Cash flows from operations during the current fiscal year to date were impacted primarily by a net loss of $87,000 adjusted by depreciation of $144,000, a decrease in accounts receivable of $187,000, a decrease in inventories of $213,000, a decrease in accrued expenses of $108,000 and an increase in accounts payable of $74,000. Cash flows provided by operations for the same period of the prior fiscal year primarily consisted of a net loss of $28,000, adjusted by depreciation of $116,000, a decrease in accounts receivable and inventories of $129,000 and $154,000 respectively and an increase in accounts payable of $259,000. Cash flows used in investing activities for the first six months of the current and prior fiscal years of $73,000 and $154,000 respectively were used to finance the purchase of new equipment. Cash flows used by financing activities for the current fiscal year consisted of $346,000 for repayment under the operating line of credit, $36,000 additional long-term borrowings and $84,000 principal repayments on existing long-term debt. During the first six months of the prior fiscal year, cash flows of $486,000 used in financing activities were primarily used to pay down the operating line of credit in the amount of $276,000, pay off the holders of $128,000 of debentures and make required current payments of $82,000 of long-term debt. During the first six months of the current fiscal year, the Company's working capital decreased by 2% from approximately $2,065,000 to approximately $2,016,000 as of March 25, 2001. The Company is dependent on an operating line of credit to meet its daily financial obligations. The operating line of $1,500,000 which is currently in place through February 16, 2002 is considered by management to be adequate to cover all expected cash requirements, including the investment in Road Renovator, LLC. Results of Operations Six Months Ended March 25, 2001 Compared to Six Months Ended March 25, 2000 Sales of approximately $6,323,000 for the six month period ended March 25, 2001 are 7% higher than approximately $5,891,000 for the same period of the prior fiscal year. Gross profits increased by 4% from approximately $1,560,000 during the first six months of the prior fiscal year compared to approximately $1,615,000 for the first six months of the current fiscal year. The steel service center sales of approximately $4,923,000 are 1% lower than sales of approximately $4,983,000 for the first six months of the prior fiscal year and represent 78% of the current period's total sales. During the first six months of the previous year the steel service center sales represented 85% of the total Company sales. The decline is the result of a lower sales price while the actual tons sold were 3% higher than the first six months of the prior year. The fabrication business, contributing 22% and 15% of the total sales for the first six months of fiscal 2001 and 2000 respectively experienced a 52% increase in sales volume from approximately $890,000 to approximately $1,354,000 for the current year. Demand for fabricated metal products was very strong during the first half of the current year, however, the opposite is likely to be true during the final half of the current year as the effect of the aluminum company shut downs begin to impact the overall market. The aluminum industry consumes large quantities of products fabricated from heavy steel plate in the process of producing aluminum. Forty percent of all the aluminum produced in the United States is produced in the Northwest, which is the market served by our Company. Approximately 25% of our current sales volume is provided either directly or indirectly from the aluminum industry. Any energy policy that prohibits the aluminum industry from acquiring adequate electricity at reasonable rates will have a detrimental effect on the steel distribution market in the Northwest. Currently, most of the aluminum producers are shut down, selling their power and paying their employees not to work. Operating expenses at approximately $1,633,000 for the six-month period ended March 25, 2001 are roughly $129,000 or 9% higher than approximately $1,504,000 for the same period of the prior fiscal year. The increase is primarily the higher cost of fringe benefits and higher depreciation expense resulting from the recent purchase of new equipment. Interest expense at approximately $138,000 for the six-month period ended March 25, 2001 is 18% higher than approximately $117,000 for the same period of the prior fiscal year. The increase is the result of equipment additions financed with higher levels of borrowing. Higher sales volume was offset by a higher cost of material relative to the inventory replacement costs dictating the ultimate market price. A net loss of approximately $88,000 for the first six months of the current year compares to a net loss of approximately $28,000 for the same period of the prior year. Three Months Ended March 25, 2001 Compared to Three Months Ended March 25, 2000 Sales of approximately $3,114,000 for the second quarter of the current fiscal year are 4% higher than approximately $2,992,000 for the second quarter of the prior fiscal year. The steel service center business, which contributed 82% and 86% of the total sales for the three month period ended March 25, 2001 and 2000 respectively, experienced a 1% decline in sales volume over the second quarter of the prior fiscal year. The decline from approximately $2,576,000 for the second quarter of last year to approximately $2,552,000 for the same period of time this year was largely the result of a lower sales price per ton of steel. The fabrication business, with a 27% increase in sales volume represents 18% of the second quarter combined sales for the current fiscal year and only 14% for the prior year. Approximately $527,000 sales for the quarter ended March 25, 2001 compares to approximately $416,000 for the same quarter of the prior fiscal year. The sales increase reflects the stronger demand experienced during the first half of the current fiscal year. This is not expected to continue for the second half of the year. Gross profit for the three month period ended March 25, 2001, at 27.3% of sales, compares to 26.9% of sales for the same period of the prior fiscal year. The resulting gross profit dollars for the second quarter of the current fiscal year at approximately $850,000 exceed the same period of the prior fiscal year by approximately $44,000. The improvement in gross profit dollars is attributed to higher sales volume where as the increase in the gross profit percent is the result of lower cost inventories. Operating expenses at approximately $838,000 for the three-month period ended March 25, 2001 are 15% higher than approximately $728,000 for the same period of the prior fiscal year. The increase is primarily the result of slightly more repairs and maintenance costs, higher depreciation and higher labor and benefit costs. Interest expense for the quarter ended March 25, 2001 at approximately $72,000 is 4% higher than the same quarter of the prior fiscal year. The increase is attributable to higher levels of long-term debt. Higher sales volume was offset by higher sales, general and administrative expense, resulting in a net loss of approximately $34,000 for the second quarter of the current fiscal year compared to a net income of approximately $22,000 for the same quarter of the prior fiscal year. PART II. OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities The Company is continuing to conduct a tender offer under an extension which will expire on May 31, 2001. During the current fiscal year the Company has repurchased 584 shares for treasury at a total cost of $320. The purpose of the tender offer is to buy out odd lot shareholders of stock with diminimus value. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (249.308). (a) Exhibits. None. (b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE COEUR D'ALENES COMPANY (Registrant) Dated: May 4, 2001 /s/ Marilyn A. Schroeder Marilyn A. Schroeder, Treasurer and Chief Financial Officer (Authorized Officer and Principal Accounting and Financial Officer) 12 12 -----END PRIVACY-ENHANCED MESSAGE-----